From The International Herald Tribune: Republican said to soften stance on debt limit BY ANNIE LOWREY AND ASHLEY PARKER WASHINGTON — As the Obama administration on Thursday sharply stepped up the volume in its tense fiscal battle with Republicans, with warnings from the president and the Treasury that a debt default could have a catastrophic global impact, a key Republican sent a message that he would not let that happen. The twin warnings came from a Treasury Department report and a muscularly worded speech from President Obama, who said that unless Congress acted soon, ‘‘the whole world will have problems.’’ But in a potentially critical development, the speaker of the House, Representative John A. Boehner of Ohio, told colleagues in a closed-door meeting that he was determined to prevent a federal default and was willing to pass a measure through a combination of Republican and Democratic votes, according to a lawmaker who was there. Other Republicans said they had the same sense of his intentions. The Treasury Department, in a report issued on Thursday, said the impasse over raising the debt limit, when the government runs out of money to service its debts at mid-month, could cause credit markets to freeze, the dollar to plummet and interest rates to rise sharply. A default, the report said, could potentially result ‘‘in a financial crisis and recession that could echo the events of 2008 or worse,’’ with results — including higher interest rates, reduced investment, higher debt payments and slower growth — that ‘‘could reverberate around the world.’’ The impact, it says, ‘‘could last for more than a generation.’’ The report comes as the White House has been steadily building up pressure on Congress to leave the statutory debt limit out of the broader negotiations over the budget and the health care law that led early Tuesday to a government shutdown. As the stakes grew higher and the public began feeling the impact of the shutdown, there were signs, both public and private, of growing division within the Republican Party both over the shutdown and the debt limit. The lawmaker who reported on Mr. Boehner’s comment, speaking on the condition of anonymity, said the speaker had said he would be willing to violate the so-called Hastert rule if necessary to pass a debt limit increase. The informal rule refers to a policy of not bringing to the floor any measure that does not have a majority of Republican votes. A spokesman for Mr. Boehner pushed back on the idea that the speaker would try to pass a debt-limit increase mainly with Democratic votes, but acknowledged that the speaker understood the need to head off a default. ‘‘The speaker always, always prefers to pass legislation with a strong Republican majority,’’ said the spokesman, Michael Steel. Other Republicans also said Thursday that they got the sense that Mr. Boehner would do whatever was necessary to ensure that the country did not default on its debt. Representative Michael G. Fitzpatrick, Republican of Pennsylvania, who was one of just 22 House Republicans this year who helped Mr. Boehner pass three crucial bills with a majority of Democratic support — to avert a fiscal showdown, to provide relief for the victims of Hurricane Sandy and to pass the Violence Against Women Act — said he expected that he might be asked to do so again. ‘‘Hurricane Sandy, the fiscal cliff, all of the big votes require reasonable Republicans and Democrats to come together in order to pass it and get it to the president’s desk,’’ Mr. Fitzpatrick said. ‘‘This will be no different.’’ It was not clear what the Boehner comment might augur for the shutdown. Under pressure from a few dozen Republican conservatives and outside Tea Party groups, Mr. Boehner has so far declined to do as Democrats want and bring a resolution to the House for a vote that would continue funding government operations but contain no policy prescriptions. He has followed this path because such a bill would pass mostly with Democratic votes — with some Republicans voting yes — and probably prompt a conservative backlash that could cost him his leadership office. The administration’s increasingly strong public warnings about the potential consequences of a debt default are being seen by some market participants as an effort to get Wall Street to pay attention, even to provoke a market reaction that might spur Congress to act. Stocks slid early Thursday, with the Dow Jones Industrial Average down about 1 percent. Asian stocks were muted. In Europe, the FTSE 100 index rose by about 1 percent, but analysts said investors were holding back out of concern over the American fiscal showdown. Mr. Obama has spoken daily about the need for Congress to act. In a speech near Washington on Thursday, he delivered one of his most forceful critiques of the Republicans. ‘‘As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse,’’ he said in the speech, in Rockville, Maryland. Employing unusually blunt language, he added, ‘‘The United States is the center of the world economy, so if we screw up, everybody gets screwed up — the whole world will have problems.’’ Mr. Obama said that a default would be ‘‘the height of irresponsibility’’ and that ‘‘there will be no negotiations over this.’’ A private meeting late Wednesday between Mr. Obama and four congressional leaders, including Mr. Boehner, ended without a break in the budget standoff that prompted the government shutdown on Tuesday, leaving 800,000 federal employees out of work, and creating disruptions for tourists, veterans, older people and children in early education. House Republicans on Thursday were expected to continue their attempts to pass piecemeal spending bills that would reopen sections of the government, one program at a time. Republicans later described the session as ‘‘polite’’ but ultimately unproductive. Democrats in the Senate have made it clear that they are unlikely to approve any House proposal unless it is a spending bill that would keep money flowing to the government with no strings attached. And since the Republicans have not abandoned their insistence that any budget measure include language defunding the president’s health care law, the government shutdown continues. In one reflection of growing Republican frustration, Senator Ted Cruz of Texas, a Republican who had militated for the effort to defund Mr. Obama’s health-care law even at the risk of a government closure, was roundly criticized by fellow Senate Republicans in a closed-door meeting when he could offer no clear path to ending the showdown, Politico reported, citing people present. The Treasury report underscored warnings not just from Mr. Obama but also from leading economists, who have been issuing increasingly dire warnings against the risk of letting the debt ceiling issue become embroiled in the political battle that led to the shutdown. ‘‘As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,’’ Treasury Secretary Jacob J. Lew said in a statement urging lawmakers to act. ‘‘Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need — a self-inflicted wound harming families and businesses.’’ The report shows that the congressional debt-limit standoff in 2011 hurt consumer confidence, small-business confidence, household wealth and the stock market, with ramifications for lending and the economic recovery. ‘‘A precise estimate of the effects is impossible,’’ the report says, ‘‘and the current situation is different than that of late 2011, yet economic theory and empirical evidence is clear about the direction of the effect: a large, adverse, and persistent financial shock like the one that began in late 2011 would result in a slower economy with less hiring and a higher unemployment rate than would otherwise be the case.’’ Economic officials have privately indicated that they are worried Washington’s repeated flirtations with budgetary and financial crises have inured the markets to the real possibility of missed or delayed payments, or even default. Brian Knowlton contributed reporting. ◼ Get the best global news and analysis direct to your device – download the IHT apps for free today! For iPad: itunes.apple/us/app/international-herald-tribune/id404757420?mt=8 For iPhone: itunes.apple/us/app/international-herald-tribune/id404764212?mt=8
Posted on: Fri, 04 Oct 2013 00:08:35 +0000
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